Dow/Cable correlations after a news release | Forex Factory

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Dow/Cable correlations after a news release

  • #1
  • First Post: Nov 14, 2013 4:11am Nov 14, 2013 4:11am
Hi guys, I realise this isn't strictly a Forex question, but i can't find the answer on Google so i thought i'd turn to here for some help.

I've only been trading Forex for just over 6 weeks (so i can't conclusively state this as fact) but in that time i've often noticed the following:

After a news release (positive or negative) GBP/USD will either strengthen or weaken AND often the DOW will also do the same. This doesn't seem to make sense to me, because if GBP/USD strengthens (more $ to the £), then the DOW should theoretically weaken because USD is not as strong as it previously was. I'm assuming that if USD has weakened, then so should the DOW - this seems to rarely be the case though.

Can anyone shed any light on this?

dirt.

(Apologies if this is in the wrong thread section.)
  • #2
  • Nov 14, 2013 7:26am Nov 14, 2013 7:26am
If the Dollar is strong, then the Dow is weak. If the Dow is strong, dollar weak. Also, strong Gold means weak dollar and vice versa. This is because the dollar is seen as a "safe haven." This is a 'general' rule and doesn't always apply, such is the market! Hope this helps!
  • #3
  • Nov 14, 2013 7:42am Nov 14, 2013 7:42am
Once you start getting into correlations the picture gets bigger and bigger. After only six weeks you have done well to notice the positive correlation cable/dow. But it is not a main indicator, not on news alerts or anytime.

For Dow positive correlation use Nasdaq. For cable inverse correlation use eurgpb. Of course Dx comes into play but one of the Scandinavian pairings are more liquid for accurate entries. I use usdnok.....

Interesting question....thank you.

The subject that you are starting to explore is known as "phasing ".This is the point at which one instrument :- stock, commodity, indices or currency pairing makes a move and so triggers other instruments to move. I know this in theory.

UJ gets into positive with DX, EG gets into positive with EUR, look for opposite moves on cable.

Mastering the art of trading phasing is trick that I have a long way to go on. Sometimes I see glimpses of the whole machine in action.

Beautiful moments , ..

Trade well
All systems of divination, like music itself,work through patterns.
  • #4
  • Nov 16, 2013 10:30am Nov 16, 2013 10:30am
Welcome to studying forex! These guys are correct. Probably the biggest correlation now is the Usd/Jpy & Nikkei 225.. same concept, but Yen & Nikkei in your example instead.. I see what you mean by a weak dollar should make a weakened Dow, but its the opposite. I find it funny when positive USD news starts a selloff in equities and everyone is unsure why

Keeping it simple; When one buys DOW, they're selling their USD in exchange. When selling S&P, they're buying Dollars. USD & US Equities are negatively correlated. A thing with correlations though.. they work until they dont. There are a couple main factors (FED) that are making these correlations strong. Careful when the landscape changes and things stop lining up!
  • #5
  • Dec 3, 2013 4:23am Dec 3, 2013 4:23am
Quoting EmeraldEyes
Welcome to studying forex! These guys are correct. Probably the biggest correlation now is the Usd/Jpy & Nikkei 225.. same concept, but Yen & Nikkei in your example instead.. I see what you mean by a weak dollar should make a weakened Dow, but its the opposite. I find it funny when positive USD news starts a selloff in equities and everyone is unsure why Keeping it simple; When one buys DOW, they're selling their USD in exchange. When selling S&P, they're buying Dollars. USD & US Equities are negatively correlated. A thing with correlations though.....
This is an interesting insight, and unfortunately one that i didn't/couldn't deduce for myself. Thanks for this!

Thanks to everyone else who also took their time to reply.

kaspopsicle - I'm interested in learning about this market phasing 'phenomenon'. Perhaps, if you have the time, you would be good enough to provide a link to some reading material?

dirt.
  • #6
  • Edited 5:50am Dec 3, 2013 5:13am | Edited 5:50am
NONE OF THE ABOVE POSTED ARE ABSOLUTELY RIGHT
MARKET RISK SHIFT CONSTANTLY
THERE ARE TIMES WHEN USD UP, STOCKS DOWN; AND VICE VERSA

TRY THIS AND STUDY IT.
RUN NIKKEI ON ONE MINUTE.
PUT IN FOLLOWING INDICATOR
AFTER A WHILE YOU WILL UNDERSTAND WHERE THE RISK IS HAPPENING.

TRY FIRST FOR STOCK MARKET ___SEE JPY AND AUD LINE SLOPE
BIGGER MOVE WHEN USD + JPY SLOPE IN SAME DIRECTION AGAINST AUD
WATCH NIKKE FALLS AND SPIKE
NIKKEI CHART S/R GIVES POTENTIAL TURN AROUND OR PAUSES OR EXIT OR TARGET

BUY ZEROING ON TO YOUR CURRENCY LINE, YOU KNOW WHICH MARKET IS INTO RISK AND WHERE CORELATION IS HAPPENIG. THEN GO TO YOUR CROSSES ETC ON HIGHER TF
CATCH YOUR PA, TL, S/R break
BET YOU WILL SHARPEN YOUR UNDERSTANDING AND TRADE BETTER
DO YOUR HOMEWORK

I PLAY THE DOW and DAX
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  • #7
  • Edited 2:54pm Dec 3, 2013 1:58pm | Edited 2:54pm
quote=dirtigr00vz;7130797]{quote} This is an interesting insight, and unfortunately one that i didn't/couldn't deduce for myself. Thanks for this! Thanks to everyone else who also took their time to reply. kaspopsicle - I'm interested in learning about this market phasing 'phenomenon'. Perhaps, if you have the time, you would be good enough to provide a link to some reading material? dirt.[/quote


Best I can do is refer you to redsword11 thread. Known as PIE (Price is Everything )

Read only Reds posts. He is a Master at reading the phasing of the market ., the whole Market.. FX, Comms, Indicies...how they all revolve around each other....

Unfortunately you will not find him live on FF anymore , but you should find him in archive

All the very best to you and the reading of PA
All systems of divination, like music itself,work through patterns.
  • #8
  • Last Post: Dec 10, 2013 11:30am Dec 10, 2013 11:30am
Quoting kaspopsicle
quote=dirtigr00vz;7130797]{quote} This is an interesting insight, and unfortunately one that i didn't/couldn't deduce for myself. Thanks for this! Thanks to everyone else who also took their time to reply. kaspopsicle - I'm interested in learning about this market phasing 'phenomenon'. Perhaps, if you have the time, you would be good enough to provide a link to some reading material? dirt.[/quote Best I can do is refer you to redsword11 thread. Known as PIE (Price is Everything ) Read only Reds posts. He is a Master at reading the phasing of the...
Brilliant! Just got round to checking this out now. Currently halfway through the 1st page and Red certainly seems to know his stuff. Definitely gonna be a interesting (and hopefully enlightening) read.

Many thanks!
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